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Competition under Nonlinear Pricing

Author

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  • Marc Ivaldi
  • David Martimort

Abstract

Despite its great prevalence in practice, competition through whole schedules of prices as function of quantities remains largely unexplored. To deal with this question, the multiprincipal incentive theory is exploited to build a theoretical model of oligopolistic competition which is fitted to data on the French market of energy distribution. A distinguishing feature of our analysis is that in equilibrium, nonlinear pricing schemes depend on an aggregated statistic of unknown individual valuations for the different goods and on the rivals' contract parameters. The empirical results show that incomplete information plays a crucial role. Since estimates of the structural parameters are obtained, inferences can be drawn on the degree of product differentiation, the effectiveness of regulatory constraint and the levels of suppliers' price margins.

Suggested Citation

  • Marc Ivaldi & David Martimort, 1994. "Competition under Nonlinear Pricing," Annals of Economics and Statistics, GENES, issue 34, pages 13-69.
  • Handle: RePEc:adr:anecst:y:1994:i:34:p:13-69
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    Cited by:

    1. Ivaldi, Marc & Verboven, Frank, 2005. "Quantifying the effects from horizontal mergers in European competition policy," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 669-691, December.
    2. Eugenio J. Miravete, "undated". "Quantity Discounts for Taste-Varying Consumers," CARESS Working Papres 99-11, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
    3. Robert Gary-Bobo & Sophie Larribeau, 2002. "A Structural Econometric Model of Price Discrimination in the Mortgage Lending Industry," CESifo Working Paper Series 739, CESifo Group Munich.
    4. Céline Bonnet & Pierre Dubois, 2010. "Inference on vertical contracts between manufacturers and retailers allowing for nonlinear pricing and resale price maintenance," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 139-164.
    5. Thomas, A. & Lavergne, Pascal, 1997. "Semiparametric estimation and testing in models of adverse selection, with an aplication to environmental regulation," DES - Working Papers. Statistics and Econometrics. WS 6221, Universidad Carlos III de Madrid. Departamento de Estadística.
    6. Diaw, Khaled & Pouyet, Jérôme, 2004. "Competition, Incomplete Discrimination and Versioning," CEPR Discussion Papers 4589, C.E.P.R. Discussion Papers.
    7. Miravete, Eugenio J, 2001. "Quantity Discounts for Time-Varying Consumers," CEPR Discussion Papers 2699, C.E.P.R. Discussion Papers.
    8. Guriev, Sergei & Kvassov, Dmitri, 2004. "Barter for price discrimination," International Journal of Industrial Organization, Elsevier, vol. 22(3), pages 329-350, March.
    9. Pierre André Chiappori & Bernard Salanié, 2002. "Testing Contract Theory: A Survey of Some Recent Work," CESifo Working Paper Series 738, CESifo Group Munich.
    10. Gary-Bobo, Robert J. & Larribeau, Sophie, 2004. "A structural econometric model of price discrimination in the French mortgage lending industry," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 101-134, January.
    11. Bousquet, Alain & Ivaldi, Marc, 1997. "Optimal pricing of telephone usage: An econometric implementation," Information Economics and Policy, Elsevier, vol. 9(3), pages 219-239, September.
    12. Xiaodong Wu, 2000. ""Pollution Havens" and the Regulation of Multinationals by Multiple Governments," Econometric Society World Congress 2000 Contributed Papers 1766, Econometric Society.
    13. Hoernig Steffen & Valletti Tommaso M., 2011. "When Two-Part Tariffs are Not Enough: Mixing with Nonlinear Pricing," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-20, October.
    14. Jensen, S., 2000. "Price Discrimination and Three Part Tariffs in a Duopoly," Papers 3/2000, Norwegian School of Economics and Business Administration-.
    15. Khaled Diaw & Jérôme Pouyet, 2005. "Information, competition and (In) complete discrimination," Working Papers hal-00243025, HAL.
    16. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, Elsevier.
    17. David Martimort & Lars Stole, 2009. "Market participation in delegated and intrinsic common-agency games," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 78-102.
    18. Miravete, Eugenio J & Röller, Lars-Hendrik, 2003. "Competitive Non-Linear Pricing in Duopoly Equilibrium: The Early US Cellular Telephone Industry," CEPR Discussion Papers 4069, C.E.P.R. Discussion Papers.
    19. Sergei Guriev & Dmitry Kvassov, 2000. "Barter for price discrimination? A theory and evidence from Russia," Working Papers w0007, Center for Economic and Financial Research (CEFIR).
    20. Eugenio J. Miravete, 2002. "Estimating Demand for Local Telephone Service with Asymmetric Information and Optional Calling Plans," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 943-971.
    21. Simon P. Anderson & Régis Renault, 2011. "Price Discrimination," Chapters,in: A Handbook of Transport Economics, chapter 22 Edward Elgar Publishing.
    22. FRANCISCO MARCOS & Juan Santaló, 2007. "Tomb price discrimination in cemeteries: competition in the market for corpses?," Working Papers Economia wp07-09, Instituto de Empresa, Area of Economic Environment.
    23. Martimort, David & Stole, Lars, 2011. "Public Contracting in Delegated Agency Games," MPRA Paper 32874, University Library of Munich, Germany.

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